Some thoughts on Universal Basic Income

July 2020

(16 minute read)

Today the world is unjust. Guaranteeing everyone's subsistence might be the best first step towards building a world that is equitable. Here are some thoughts on universal basic income, sorted into responses to questions and concerns others and myself have had about UBI.

  1. What is universal basic income?
  2. Why do it?
  3. How do we pay for it?
  4. Why give money to rich people too?
  5. Wouldn’t people stop working?
  6. Why should people get something for nothing?
  7. Communism and Capitalism
  8. How do we implement it?
  9. More info

"Tomorrow's reality is today's utopia."
- Götz Werner

1. What is Universal Basic Income?

Everyone already has a basic income. It’s the income you get one way or another in order to survive. For different people getting this basic income is conditional on different things. Usually it depends on having a job that pays, other times it depends on proving to the state that one is deserving of benefits, and sometimes it means eeking out a living on the street.

The idea behind universal basic income (UBI) is simple: make basic income unconditional. “Unconditional” means that getting this basic income doesn’t depend on anything. You don’t need to work to get it. You don’t need to prove that you are deserving. You only need to exist.

It is universal, meaning everyone gets it. It is crucial that "everyone" includes everyone, regardless of their employment-status or income for example, so that it is truly unconditional.

I will use “universal” and “unconditional” interchangeably, because they’re two ways of saying the same thing: everyone, no matter what.

Practically speaking “everyone” means “some broad definition of everyone.” Some UBI schemes include children, and some don’t. Also, implementing UBI in a country excludes people outside the country, and possibly non-citizens within the country.

Universal basic income is basic, meaning it covers your living expenses; not less and not more. This generally means enough money to buy food and housing and be able to participate in public life. And everyone remains free to earn money beyond the basic income.

It is an income, meaning it is money that you can spend as you wish. In order to be an unconditional income it is important that UBI is simply money, and not a voucher that can only buy food for example.

Different UBI schemes affect existing welfare-programs differently. Some leave existing programs largely in place, some replace them almost entirely.

Today's welfare states guarantee their people's subsistence, but only on the condition that they take paying jobs or prove that they are looking for or unable to do such jobs. Implementing a universal basic income is a paradigm-shift into a society where people's subsistence is guaranteed regardless of how they choose to spend their time, whether they are working or “deserving” or not.

What follows are my responses to the most pressing concerns people, including myself, have about UBI, from technical “It can’t be done!” concerns, to moral “It shouldn’t be done!” concerns. I hope it will become clear that UBI does not solve everything, but is a technically elegant and morally just step towards an equitable world.

2. Why do it?

A fundamental concern is the question of why we should do this at all. Although this series is much more about the "Why not?" of universal basic income than the “This is why!”, there are three main reasons why UBI is a good idea.

i. Equality of opportunity

A universal basic income frees every person from worries about their basic survival. When a person no longer has to spend most of their time keeping themselves or their family afloat, they can start focusing on their own personal development, for example by continuing school. UBI improves every person’s chances of leading the life they want to live, as opposed to one determined by being born into unfavourable circumstances. And when creativity that otherwise would have been stuck in survival-mode can flourish, everyone benefits.

It is also democratic. When only the privileged have time and resources to be politically active, the rules of the game will reflect their interests. If we want inclusive democracies, we better make sure that everyone has time and resources at the end of the day to actually participate in politics; to join public debate, to get meaningfully informed, to protest. A UBI does not in itself solve all systemic injustices. But guaranteeing everyone’s livelihood gives people a realistic opportunity to enact change.

ii. The bullshitization of work.

In 1930, economist John Manynard Keynes predicted that we'd be working 15 hours per week by the 21st century. He thought that as technology increased productivity, we'd spend less time making more things, and take more time off as a result. Technology has increased productivity and people work less now than in 1930 but still, even in the global North (where much work is outsourced), people still work around 37 hours per week. So what are they doing nearly 40 hours a week?

Today, most workers in the global North work in the service sector, working in retail, educational, health, or financial services for example. Among them are people with “bullshit jobs.” These jobs are superfluous jobs, jobs “so pointless that even the person doing it can’t justify its existence to themselves.”

What kind of jobs are these and why do they exist? They are often well-paying service-sector jobs; middle managers who supervise people who don’t need supervision, lawyers and telemarketers who feel their industries shouldn’t exist, secretaries hired to boost the prestige of their bosses, and many more examples. What would happen if all these workers striked one day? Probably nothing much. It might be much like the time Irish bankers striked (and nothing happened).

Take the example of lawyers: Some number of lawyers are needed for a functioning justice system, but the seemingly infinite demand for corporate lawyers is not a sign that they are valuable to society. It is a sign that they are valuable to the tiny minority of people who control most of the world’s wealth.

Why these jobs exist is harder to say, but the perverse incentives managers have to manage many employees, for the sake of their own prestige, might have something to do with it. Perhaps it also has to do with some workers realising that their job does nothing but help the wheels of mass-consumerism spin.

As a former Facebook employee reflects; “The best minds of my generation are thinking about how to make people click ads.”

Regardless of why these jobs exist, what is clear is that many workers feel their job is meaningless. In the UK for example, around 37 percent of workers think their job makes “no meaningful contribution to the world,” while 13% feel they don’t know. A Harvard Business Review survey of 12 thousand professionals found that half of them felt their job had "no meaning and significance.” A Gallup poll of 230 thousand workers from 141 countries found that 87 percent of them were “actively disengaged” or “not engaged” at work.

Work for the sake of work, doing something you find meaningless because you have to or because it’s the norm, working to win in the endless, zero-sum game of status; that is the bullshitization of work.

A universal basic income doesn’t stop people from working many hours or striving for prestige. What it does is decouple our basic subsistence from paid work, nudging us to reflect on what we actually think is a meaningful use of our time. It might lead us to a new conception of work where “what you do” is not whatever thing you do to pay the bills, but the thing you find meaningful to do.

And when work is no longer the arbitrary thing we do for survival and status, but simply meaningful endeavour itself, we no longer work for an income; we have an income in order to work.

ii. Automation.

Technological advances enable computers to do more and more things once doable only by humans. This will lead to massive wealth creation and might lead to massive unemployment too.

The idea that automation will lead to massive unemployment is fiercely debated. On one hand there are many jobs, maybe half of all jobs, that are at risk of being automated. What will the USA’s 3.5 million truck drivers do when self-driving trucks come around? Their median age is 46 and almost none of them have a university degree, which makes it hard to imagine them joining the high-tech workforce.

On the other hand some point to how the workforce has historically transformed, not shrunk, in the face of technological change. Low unemployment rates confirm this. One might respond that the jobs created are increasingly “bullshit jobs.”

But regardless of whether automation creates unemployment, meaningless jobs, or meaningful jobs, one thing is for sure; automation will create wealth, and that wealth will go somewhere. An example is one we’re already seeing in supermarkets. When shop owners get automatic cashiers they create wealth because they no longer have to pay human cashiers who demand a wage and take holidays and get sick. Some of that wealth goes into their pockets and some of it goes to the developers of the technology, and some of it can benefit the public through lower prices.

Cashier jobs disappear but new jobs in the tech-sector are created. We call it creative-destruction and often assume it’s equal parts creation and destruction. But the trend, especially since the late 20th century, has been that when jobs were automated, more jobs were displaced than created, wealth gains went to the few, and the wealth and income gap widened.

The fall and rise of income inequality: Share of national income going to the richest 1%

Look, we beat high inequality before. We can do it again. The rich didn’t volunteer to redistribute wealth then, and they won’t now.

Why does it matter that some get super rich if everyone benefits?

It’s true that we might all benefit from automation, for example if artificial intelligences improve health services or help mitigate the climate crisis. These are what we call absolute gains. But relative gains, how much someone gains compared to someone else, matter too. Relative gains in wealth are especially important because wealth is power, and power is a zero-sum game. That means that every time someone becomes more powerful, someone else has become less powerful. Increasingly concentrated wealth means increasingly concentrated power, and that is a threat to democracy.

Whether automation creates massive unemployment or not, an unconditional basic income is desirable. It guarantees people a livelihood whether they have a job or not, smoothens transitions in a rapidly changing job-market, and prevents anyone from having to do something they find meaningless. And a universal basic income can help stop wealth concentration from undermining democracy, by giving people the time to get politically active and push for policies that distribute the fruits of automation to the many.

3. How do we pay for it?

Maybe the biggest technical concern of all is that universal basic income can’t be paid for because it’s too expensive.

Taxes can pay for a universal basic income. This works when we assume that most people continue working paid jobs and pay taxes. This assumption is not unreasonable, for reasons coming up later.

In the UK for example, a universal basic income of £5,694 per year for children, £6,012 for adults, and £10,313 for pensioners would cost the UK government about £200 billion per year, which is roughly what the UK spends on welfare today. A UBI could replace much of the current conditional welfare spending, and not come on top of it.

It is also possible to design a revenue-neutral UBI scheme. “Revenue-neutral” means the UBI does not take more from the government’s budget than UBI-receiving tax-payers pay back into the system. A less generous scheme, set at the level of current benefits, pays £3,494 per year for children, £3,812 for adults, and £8,113 for pensioners. For this scheme to be revenue-neutral, everyone’s income tax is increased by 4 percent. The total cost for the UK government is roughly -£4 billion, meaning this scheme adds £4 billion to the UK’s budget.

Both schemes include extra support for differently abled people, cuts to current benefit programs (which are more than replaced by the UBI), and abolition of the “personal income tax allowance” (meaning everyone pays income-taxes). Any UBI funded through taxes can be made more generous by spending more of the government budget or enlarging the budget by increasing taxes.

Another way that taxes might pay for a UBI is through a “value-added tax” (VAT). This tax already exists in many places, and is simply a certain fraction of any sale price. Europeans for example pay about 21% of everything they buy towards VAT. Here’s a simplified model for how a VAT could fund a universal basic income:

Here, in a given month, everyone receives $1000 as UBI. Person A doesn’t have any additional income, while everyone else does. Everyone pays 50% of their spending towards the value-added tax.

In this model everyone spends all of their income and so the VAT is progressive, meaning it taxes higher-income earners more than lower-income earners. In reality however, richer people spend a smaller part of their income and save or invest the rest. And so poorer people, who spend a larger part of their income on everyday things, feel the tax burden more intensely. A tax on wealth (not income) is needed to correct for this.

Wouldn’t giving everyone money lead to inflation?

In other words, if we give everyone the same amount of money every month, won’t everything become more expensive and cancel out the effect of the UBI?

No. When we fund UBI through taxes, then we are not injecting anything new into the economy, and so there is no reason to expect inflation to happen.

In the end I hope it’s clear that funding a UBI is a challenge not simply because “it’s expensive.” The challenge is figuring out which of the many ways of paying for it is best. And it’s worth thinking about whether a universal basic income is worth any cost at all. So let’s put down our calculators for now and get into some moral issues.

4. Why give money to rich people too?

Universal basic income goes to everyone, including the rich. Why should we give money to people who have more than enough? Why not give it only to those who really need it?

An unconditional living wage for everyone might sound like a nice principle, but it is also helpful to the economically vulnerable. For example, someone who loses their job in the conditional welfare system has to invest time to prove to the State that yes, they’re unemployed, and that yes, they’re looking for a job. And when a job comes around, they might have to take it whether they like it or not.

The unemployed and all of society would be better off if unemployed people instead could use this time to gain new skills and look for work they actually want to do. The conditional system stigmatises the unemployed, and a bureaucracy is required to sort the deserving from the undeserving, a task the bureaucracy will never do perfectly. And there is a power imbalance as welfare recipients are continuously forced to prove their worthiness.

Power imbalances also occur on a more personal level when someone depends on someone else for their basic income. A rich household for example may have one breadwinner earning more than enough for them and their partner. Meanwhile, the dependent’s financial freedom is limited, even though they might be doing valuable unpaid work such as raising a child or maintaining a home.

A conditional basic income breeds unfreedom, whether it is conditional on fulfilling certain requirements for the State, staying in a partnership, adhering to one’s parents, or working a job one dislikes. An unconditional basic income is liberating for all, and that is why it should go to all.

We should keep in mind that when UBI is funded through taxes, the rich are the ones paying most into the system. If we are concerned about the rich getting things they don’t deserve, look for things they might do that benefit them at the expense of everyone else, such as evading taxes.

5. Wouldn’t people stop working?

If everyone had their living expenses covered no matter what, would anyone still work?

To be clear, a universal basic income does nothing to disincentivize earning money. Like today, people can invest their time and resources to earn money beyond their basic income, and what they earn would have no effect on the UBI they recieve. Remember that a UBI is more or less basic, and that many people today are willing to work to enjoy a higher-than-basic income. It is reasonable to expect that they’d still be willing in a world where the first part of their income is guaranteed.

You know what disincentivizes work? A conditional basic income that depends on the recipient being unemployed. People in “unemployment traps” are being perfectly rational when they decide to stay unemployed and keep their benefits instead of finding work that will make them lose their benefits. The social "safety net" is a good analogy for our current welfare-systems; it catches you when you fall, and it’s hard to get out of.

But if everyone has a basic income, won’t employers just lower wages?

For people with lower incomes it’s a clear no, because it is people with next to nothing who work for next to nothing. When your basic expenses are covered no matter what, you can look for jobs longer, turn down jobs or demand better pay. Employers can no longer offer jobs with terrible conditions knowing that you have no other option. Because everyone always has another option guaranteed.

And so the universal basic income creates a floor of dignity to stand on, because it gives everyone the ability to sincerely accept or reject jobs.

If a universal basic income leads more people to do jobs they truly enjoy, then jobs that many people find fulfilling might be paid less.

But who’ll do the dirty work?

If everyone has an unconditional living wage, would anyone be willing to do the “dirty work”? Who will do the manual labour of picking rubbish, or repetitive work like being a cashier?

Hidden inside this concern is a recognition that such jobs are underpaid and that people wouldn’t do them if they had a real choice. That might be true, in which case these jobs would simply have to pay more. Also, automation is rapidly replacing these low-skill jobs, as already seen with cashiers, and the incentive to automate these jobs will increase the more expensive it is to get humans to do them.

“Dirty work,” automated.

An unconditional basic income also allows people to do work they couldn’t do otherwise. Markets often under-provide valuable services that aren’t directly profitable. For example: protecting ecosystems is a very valuable thing to do (even if one only cares about human beings), but it is a service that is underprovided. This is because the benefits of healthy ecosystems (e.g. cleaner air) are spread out; the benefits hardly create profits for the service-provider. The situation is similar in the case of access to quality education. Because although the benefits of a more equitable and skilled society are great, they are diffuse, and so money-seeking entrepreneurs don’t find it worthwhile to invest in quality education for everyone.

A nice feature of human beings is that what we find meaningful is often pro-social, such as helping others, protecting our surroundings, or building communities. A universal basic income enables people to do work that is valuable but not directly profitable in money terms. The Earth and the beings on it would be better off for it.

6. Why should people get something for nothing?

The idea of universal basic income pokes at the heart of the work ethic that has been instilled in many of us. One might feel that in a society where people get subsistence for nothing they become aimless, unchallenged, parasites, or all of the above.

Keep in mind that economics is about using our scarce resources in the best possible way. If liberating people to let them do what they find most meaningful is not the highest possible goal of economics, then please tell me what is.

Still, one might feel it isn’t right for people to get a share of wealth they did nothing to help produce.

Underneath this concern is a view that when we distribute wealth to the people, we are redistributing wealth produced by the private sector (by entrepreneurs and their companies) to the public, via the government. Almost anyone with this view would agree that some redistribution is necessary for a functioning society, but one might feel that guaranteeing subsistence no matter what is going a step too far.

Let’s consider how the feeling of giving everyone “money for nothing” might change when we begin to appreciate how much private wealth creation depends on the public sector. Open an iPhone and you will see many parts that were the result of publicly funded research, like the GPS or the touchscreen. Look at Google, which was born out of publicly funded research, and other giants, and find out how many of them have received crucial support from governments, in the form of grants, subsidies, or tax-breaks. Consider some of our greatest thinkers and entrepreneurs, and how many of them developed themselves in largely publicly funded settings such as universities. Imagine the creative genius the world never got to see because it was born into the wrong public setting.

If "every private accomplishment is possible only on the basis of a thriving commons," then the lines between private and public get blurry. And redistribution of wealth begins to taste more like collective retaking of collectively produced wealth, and not collective taking of privately produced wealth.

The current crisis has made it clear that big firms "privatize gains and socialize costs." Having lobbied for lower taxes and then dodged them, and having used much of their gains to buy their own shares, they run to the government for tax-payers’ money to save them when times get tough, and might just keep milking the public when the coast is clear.

In the end it seems that there’s a difference in worldviews between those who believe "peaceful dreams at the end of the day" to be a birthright, and those who believe that this must be earned. But wherever you stand, let there be no confusion: insofar as the wealth of private companies depends on the collective, or comes at the expense of it, distributing that wealth to the collective is the only fair thing to do.

7. Communism and Capitalism

All this might sound vaguely familiar, and one might ask...

...isn't that communism?

The answer is a big no, because UBI does not bring us to a centrally planned economy. It is an unbureaucratic rule added to the market economy. Universal basic income would join universal healthcare and universal education on a list of things the market won’t provide on its own, but are simply a part of the game.

We have to remember that free markets don't exist, in the sense that there is no market that is free from rules. We decide the playing field on which markets operate. We can operate markets on a playing field where people can be owned as property and it’s okay for children to work; or not. We can operate markets on a playing field without rules to protect ecosystems; or not. We can operate markets on a playing field where no one’s basic subsistence is guaranteed; or not.

One might be more concerned about the flipside: capitalism.

Some see UBI as the next step in a long history of elites giving the rest just enough so that they'll shut up and leave them alone. If so, then UBI is just a bandaid on a broken economic system that is widening inequality and destroying the planet.

It’s true that when UBI is funded through redistribution of income (taxes), it comes in part from elites to the rest. Musk and Zuckerberg support it. One could call it philanthropy.

Still, one would have to recognize that this gift is unprecedented. UBI is the gift of spare time. As philanthropy-sceptic Anand Giridharadas says: "plutes gonna plute." (Meaning plutocrats will act in their own interests and perpetuate their own wealth, even if they give to charity.) With the gift of spare time and unconditional subsistence on their hands, expect ordinary people to act in their own interests too. Expect them to reshape capitalism or replace it with something new, to the benefit of the many.

8. How do we implement it?

Whether you’re on board with the idea or not, you may wonder how we would go about actually implementing a universal basic income. It could go something like this:

  1. More, bigger trials of universal basic income. (There’s already been quite a few. Not all the trials have been exactly “UBI”, for example when they’ve only gone to unemployed people. Still, the results have been overwhelmingly positive.)
  2. Digesting the findings of the trials.
  3. Implementing a UBI indefinitely in a country or part of a country, either gradually (e.g. starting with one age-group and scaling up) or outright.

All of this requires people to want it, which we're already seeing, and politicians to listen. That means voting for people who are serious about universal basic income. It means supporting advocates of UBI, for example by signing petitions. It means discussing with people around you to bring the idea into the mainstream.

Doing larger-scale UBI trials will probably show us some strange, unforeseen side-effects. But although UBI is a paradigm-shift, it surely won’t flip the world on its head. Because everyone already has a basic income. A universal basic income simply makes it an unconditional human right. ■

Thank you for reading. Feel free to reach out, I'm curious to hear your thoughts. And here's some more info that I think is very worthwhile.
Sincerely,
Nik

More info

Universal Basic Income (English)

Bedingungsloses Grundeinkommen (Deutsch)

Borgerlønn (Norsk)

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© Niklas Bazzan Schelling